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Ken's Mailbag Q&A 1/06/11 - Buying call options after a breakout?
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
CANSLIM.net


 

Subscriber Questions:

January 1, 2011

Dear Ken,

What are your thoughts on buying a call option on a yellow stock the day after a confirmed breakout that is still in the buy range?

Happy New Year! Gil

 
Ken's Response:

 January 5, 2011

Dear Gil,

I understand what you are getting at and it sounds like a situation where someone might be trying to take a small amount of money and turn it into a large amount of money quickly. The problem with options is that you can't limit your losses effectively at 7-8%, and that loss-limiting rule is CRUCIAL to protecting investors from badly eroding their investment capital.

I am not saying it cannot be done. I have not shared the story of my own experience with options as much as I perhaps could have.  Back in the mid-90's, near the time I was about to launch canslim.net, I started going about it with a winning streak of 9 consecutive profitable options trades. Options trade number 10 wiped it all out for me. Before then and since then, I have never met anyone who turned a small amount into a large amount by investing in options.  Since then, I and dozens of clients enjoyed the experience of turning small amounts into large amounts by concentrating our capital in a small handful of carefully selected high-ranked leaders in a bullish market environment per the system guidelines.

I see doing anything else as unnecessary speculation, when we have a fact-based system that has proven capable of turning a small amount into a large amount. 

I'll add this. At the time of my options trading experience described above, there was a old fellow who worked at the same broker/dealer firm named Herb Jacobson. He was a nice man, and I am quite convinced he understood bull spreads, calendar spreads, and strangles and such, and he probably knew more about options tactics than anyone I will ever meet.  Dubbed "The Silver Fox", Herb's claim was that he was the very first licensed put/call broker in the state of California and added that he once had the famous Mr. O'Neil as a customer.  I wanted to learn what I could from Herb, but there came a point when he told me flat out, "Kenny, do yourself a favor and just stick to what you're doing and don't mess with options."  I have followed his advice since that day, and I am very thankful to have enjoyed the successes I have with the fact-based approach.

Please let me know if there is any way I can be more helpful to you in your efforts.

Best regards,

Kenneth J. Gruneisen
Founder & Contributing Writer for CANSLIM.net
www.canslim.net

About Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program.  Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.

The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.


Comments contained in the body of this report are technical opinions only and are not necessarily those of Gruneisen Growth Corp. The material herein has been obtained from sources believed to be reliable and accurate, however, its accuracy and completeness cannot be guaranteed. Our firm, employees, and customers may effect transactions, including transactions contrary to any recommendation herein, or have positions in the securities mentioned herein or options with respect thereto. Any recommendation contained in this report may not be suitable for all investors and it is not to be deemed an offer or solicitation on our part with respect to the purchase or sale of any securities.

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The recommendations made by CAN SLIM® Certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil + Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil + Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.

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